Transcript: Finance Minister Bill English

28/05/2016

Finance Minister Bill English

Lisa Owen: Well, Bill English's eighth budget has delivered the government books back into black, and confident projections for more surpluses and growth. 'Steady as she goes,' he says. But the sceptics called it the buffet budget — morsels here and there ahead of the full spread in election year. And Winston Peters bluntly labelled it the 'get stuffed' budget. Notably, there was little for infrastructure, Auckland's housing woes or those people living in cars and garages. So when I spoke to the finance minister earlier, I asked if his emphasis on prudence and stability wasn't a little tone-deaf.

Bill English: No, I disagree with that. Look, the budget was never going to be the vehicle for fixing every housing problem, because you can't buy your way through the Auckland housing pressures. We've been through all this in Christchurch, where the problem has now been largely solved. It takes time. And so the important work that's related to housing is about getting the national policy statement out in the next few weeks, getting the Auckland Unitary Plan right, because the people that are sleeping in the cars are the victims of years of misdirected planning...

Yes, but you've had eight years.

...that's focused on high-value housing.

You've had eight years, Minister.

Yes, but we don't make the decisions, Lisa. Auckland City Council make the decisions. Even the government can't build a house in Auckland unless Auckland City Council frees up the land, provides the subdivision consent, processes all the consents, provides the building consent and allows the house to be occupied.

All right. I want to come back to that a bit later. But, as promised, you brought forward spending from the 2017 budget to keep pace with immigration. So are we getting as much per person in health and education?

Yes, we probably are, but the amount of money that's spent is less important than what results it gets. You know, there's some people trying to argue that you show you care by shovelling more and more money out. And the history of that in government is that you can shovel out a whole lot of money and make no difference whatsoever. So the budget's got a pretty strong focus on results, including in health, where the money goes, for instance, to the roll-out of the bowel cancer screening programme, which when it's up and running will screen 350,000 people on average each year.

Point taken, Minister, but I just want to be clear on this, because if you look at the figures, let's say for health, a variety of economists say that we needed about 700 million a year just to keep pace, yet health is getting about 570 million a year. You've frozen the schools' operational budgets, so to be absolutely clear, per capita spending on health and education, it's down, isn't it?

No. Look, I couldn't say for sure whether it's up or down. It's probably about the same. The point I'm making is it's the wrong measure. The measures that matter are the ones that are about focusing on getting results.

Shouldn't you know whether it's up or down in terms of spending per capita? Because that's something that our viewers will want to know.

It's not a measure we apply. And I think your viewers are as interested in— probably more interested in the results we get for them. For instance, in education, we have targeted the spending on the 150,000 children who are most at risk of educational underachievement. Now, per capita, I can't tell you whether it's up or down. What I do know is for children from benefit-dependent households, there will be $80 per child of those in our schools. And they're spread right through our schools, regardless of decile. So that's trying to focus the resource where it's going to have the most impact.

This kind of takes us back to where I started here — the people in the cars, the first-home buyers who are locked out of the Auckland market, Auckland infrastructure. People will look at this and think that you are effectively asking those people to hold tight for at least another year so that you can afford to give tax cuts.

No, that's not the case. For instance, for the cases that have been in the media around living in the cars, a lot of those are a bit more complex than people might realise. But in any case, we have more money than we can spend on places, on houses for people in serious housing need in Auckland. The problem isn't money; there's enough of that. The problem is getting enough houses. Even though Auckland City is actually completing 40 houses every working day, it's still not enough. And that's why in the next few months we've got to work hard with the Auckland City Council to get more houses, because the government can't just magic up houses; they have to be built by real people on real land. And that's controlled by the Auckland City Council.

Well, actually, let's look at that. The problem, you've said, is a huge supply shortage, isn't it? So is that shortage getting better or worse?

Well, it depends. There's some signs that demand might have flattened out a bit, because it's all supply relative to demand. But in terms of the supply itself, I don't think it's getting worse. We're just focusing on working with the council and doing what the government can with its own land to ramp up the supply, because we know Auckland needs more, and it needs it faster than we're able to deliver it.

Okay, well, just let's look at some of those figures. I mean, experts can't agree exactly, but they think that we're down about between 20,000 and 50,000 houses in Auckland — we're short of those — and that we need to build about 13,000 a year to play catch-up. We're not building 13,000 a year, so the supply must be getting worse.

Well, and that's in the hands of the Auckland City Council, who are the people with the legal and community responsibility to get more land available so that more houses can be built faster. We've been through this in Christchurch. You can ramp up the construction workforce. You can change the planning rules. In Christchurch, house prices are flat to slightly falling, despite the fact that two or three years ago there was very substantial demand. And I might say the same kind of stories about it. Now, there was a lot of tension at the time in Christchurch as the system cranked up supply to meet the strong demand.

The thing is you point the finger at the council there, but the council has been very clear about the fact it needs help with infrastructure. it says it needs 3 billion in the next 10 years for infrastructure. Where do you think that money's coming from? Because the council's nudging its debt ceiling. It can't rate people off their properties. So where is the money coming from?

Well, fundamentally, that's Auckland's issue to deal with. We are certainly contributing. I mean, right now we're in intensive negotiation for a contribution of over $1 billion from the taxpayer to an Auckland City Council transport project called the Central Rail Link. Now, in the normal course of events, they would pay for that. We're negotiating where taxpayers will pay for that. That's a significant reduction in the burden on the council, and it allows them to pay for other infrastructure.

Minister, isn't it central government's responsibility to assist with that infrastructure?

No, fundamentally it isn't. It is the council's responsibility. That's the deal. They get to decide on how their city is planned, and they get to pay for the development. And for a lot of the people living outside Auckland and inside Auckland, there are real benefits from growth. And part of the puzzle here is that as more people turn up in Auckland and as incomes rise, growth is good. The council benefits from that, and so do ratepayers. And so they've just got to work out a better alignment between the funding and the growth.

In terms of that better alignment between funding and growth, then surely when you come up with the national policy statement in a few weeks' time, it has to make some kind of allowance for the council to raise money, using a congestion charge or something similar.

The government generally keeps out of their way, and generally councils don't want government interfering with how they run their affairs. The national policy statement won't cover all the issues. It'll focus on primarily…

But you are interfering, aren't you? You're going to make a national policy statement that lays down the law. They want some kind of levies or taxes. They're not allowed to do that. So you are interfering.

Well, there will be a discussion from the national policy statement as it goes out. As I've said in the Budget, it'll be more directive to councils to enhance supply, bearing in mind that in Auckland they spent a lot of years trying not to grow supply, and that's the price—the people who pay the price for 20 years' misdirected planning are the low and middle-income families whose stress you are seeing represented in the media. That's who misses out – not the high-income people. They can afford to pay for the nicest looking apartments and the nicest looking streets. But low- and middle-income families can't.

All right. Well, I want to talk about the story that we broke on The Nation about homelessness. In Auckland, every social agency that we went to about that story told us that emergency housing is full. Did you know that? Did you know it's full?

Well, that is why there has been a package announced a few weeks ago to underpin the funding of emergency housing – about $40 million – so that we can get more emergency housing in places around the country.

Yes, but that doesn't add new places, though, does it? Sorry, I'm just wanting to establish whether you knew when that story went out. Did you know that emergency housing was full up?

Yes. We've known about housing stress in Auckland for a number of years. It's why the government has made some very direct statements about the obligations of the city council to change the planning rules to enable more supply so we can get more houses. That is the only way people who aren't in houses can get in houses is when a house gets built. The only people who can agree to get that house built are Auckland City Council. We provide subsidies. The government provides 2 billion of subsidies a year. We subsidise 60 percent of all rentals in the country and probably more than that in Auckland. We're putting up the money. They have to put up the land and the houses.

Minister, in terms of the emergency housing, I just want to be clear on this. Social agencies told us about a year ago that those places were under stress and now they are full up. Do you know the difference between under stress and full up? Did you appreciate that change in climate?

Yes. That is why the package was announced, actually, a number of weeks before you apparently broke the story – the story that has been sitting there for a couple of years. That is why the package was announced – because of stress on the emergency housing. And we put in 40 million. Emergency housing's been a bit of a dog's breakfast for decades. We worked a way with the agencies over quite a long period of time – very good work done by Paula Bennett – to work out how to make it more effective. And that's why the package was announced.

So why didn't you do more? If you've known all along that this is the issue, why not do more? Because that package doesn't add new places. Why not do something more in the Budget?

It will add new places. We put in quite a bit of money. The agencies get to use that money, and we'll see how it beds down. And if more is required, we would do that. But it is only a short-term fix, because you can't put people in houses that don't exist.

But don't you think from what we've seen, it absolutely is required? You seem to be questioning whether it is needed.

No, I'm not questioning that. We've taken a big step to organise emergency housing so it's more effective, to sort out the funding, make it clearer, more transparent and a lot bigger.

So more is needed? More is absolutely needed, Minister. Is that what you're saying?

Well, it could be. We can't fund houses that aren't there.

'Could be' or 'is'? 'Could be' or 'is' needed?

Well, look, we put in the money. I'm sure that in six months' time, there will still be people who have significant housing problems. Some of those will be able to be directed to social housing. Some of them will explain the full stories of their lives which aren't always explained to the media in the way that they're represented. And some of them will be really genuine cases who need more emergency housing, and if that's the case, then we have the capacity to respond. But bear in mind, when we pay for more emergency housing, we're probably using houses that would otherwise be available for social housing. And when we pay for more social housing, we could be using houses that would otherwise be bought by first-home buyers. The answer to all that is more houses on the ground faster, otherwise we're all competing with each other for a limited supply of houses.

All right. Well, I want to look at you're choosing to pay down debt rather than borrow, and you're choosing to do that rather than build at a time when money is the cheapest it has ever been. Can you just explain the logic of that to me?

Well, if you looked at the Budget charts, you would see that in fact our infrastructure spend in 2017 is double what it was in 2013. So it's a myth—

But it's down, though, Minister. It's down. Your spending on infrastructure is down from 1.7 billion to 1.4 billion.

No, it's not. Look at the charts. In 2013, it was 3 billion. In 2017, it's 6 billion. That's double.

Looking ahead, Minister, it's down.

Well, it peaks in 2017. We don't do it because economists say money's cheap. In fact, I listened to a banker this morning say this is the time to pay off debt.

But that's the point, isn't it, Minister? Why are you cutting? Why are you cutting back on infrastructure?

We are not cutting, Lisa. There is no evidence of cutting. I mean, I'm involved in the decision-making. The capital allowance this year is about a billion higher than last year. The total spend on the ground is double what it was in 2013. Whoever's telling you it's being cut is simply wrong.

You're saying it's peaking in 2017 and then tapering off.

Well, there's further decisions to be made. It may keep going after that. We've put out the forecast for how much will actually be spent on the ground over the next five years. Next year we get to make another whole set of decisions about where to spend the next billion or so. But there's no evidence of cutting infrastructure spending. You're simply wrong.

Okay. Well, I want to look ahead to next year. You've made a virtue out of fiscally responsible, perhaps boring Budgets. You've allowed yourself 1.9 billion to spend in next year's Budget. Are you prepared to blow that spending cap to give tax cuts?

Well, the allowance that's there for next year is – as I've made clear about a month ago – explicitly just for the act for spending and does not include tax reductions. So if there were tax reductions at any time over the next two or three years, that would be in addition to what we've allowed for government spending.

And just to be clear, any tax cuts would come in your fourth term?

Well, even if you made decisions in the Budget next year, they would occur in the next term of government, yes.

And they will only come in if you meet all your fiscal targets, yes?

Well, that's right. We've got a set of fiscal targets. Now, there's always… You never quite know what's going to happen with the economic forecast. You might find there's more room or less room. But those decisions are all in the future, which is why we're not being explicit about it now, because we simply haven't made the decisions.

All right. Thank you so much for joining us this morning, Minister. Much appreciated.